Diageo keeps benefits flowing
Diageo’s £2.9bn defined benefit scheme comprises eight membership categories: three non-contributory sections (closed since 1988); two main contributory sections (Silver and Gold); and three executive sections (two contributory, one non-contributory). The scheme has a total of 70,700 members and is open to all permanent, temporary or casual employees of the company in the UK.
Diageo’s scheme gives added flexibility to employees by enabling them to switch between the Silver and Gold levels at any time to reflect their changing circumstances. For executives, it provides generous DB accrual levels of 1/40th or 1/30th depending on seniority. Furthermore, 100% of pensionable earnings over the earnings cap accrue unapproved benefits at the same rate.
Members also have the ability to pay additional voluntary contributions (AVCs) through Prudential. Diageo’s AVC arrangement has been designed to provide a wide range of investment options to cater for the varying needs of its employees – all at less than Stakeholder charges. Members can also convert AVC funds into pension using the scheme’s own rates which are guaranteed to be more favourable than insurance company annuity rates.
All of Diageo’s pensioners are currently in receipt of a pension that has retained its full purchasing power since the date they left company employment. In addition, the scheme intends to continue increasing deferred pensions and pensions in payment fully in line with RPI, subject to the scheme’s satisfactory financial position.
Diageo’s scheme has also modernised its ill health rules, which now place a greater emphasis on a member’s condition, rather than the length of time they are likely to suffer from it. Uniquely, the new rules also allow the trustees to increase a member’s pension where there has been a significant deterioration in the member’s state of health. An independent medical adviser has been appointed to act as chair to a panel of experts in all future ill health disputes.
The Pension Member Forum, made up of employee representatives from around the business, has recently been set up to act as a focus group to help Diageo further understand members’ fears and concerns as well as provide feedback on future communications.
The www.diageopensionsuk.com site was launched in November 2001 to offer a wide range of information on matters relating to scheme benefits, administration and management and to also allow members to access bespoke scheme information matching their profile.
In addition to‘Talking Point’, an active member newsletter issued throughout the year, Diageo Retirement Association Magazine, is issued to pensioners on a quarterly basis to promote closer pensioner contact. The newsletter was recently awarded with the “best publication” award at the 2001 Communications in Business (CiB) Awards. In total Diageo believes it has spent an average of £4 per member on communications alone over the past year.
In order to understand more about its employees’ needs, Diageo carried out an independent survey of its employees in March 2002 to find out more about their service expectations and understand their future retirement needs. The survey was released on paper and online and received 900 responses, an impressive result.
Diageo has also improved its benefit statements so that they contain the capital value of the improvement in their employees’ pension benefits over the past 12 months. Statements are issued shortly after the company’s annual pay review (1 October), which ensures members receive up-to-date information. Rather than providing generic benefit statement notes, Diageo provides members with bespoke information specific to them – such as the impact of Inland Revenue limits. Staff are available at each location to deal with any follow-up requests.
Tailored roadshows are held at employer locations throughout the year to promote the benefits of membership and to meet individual member needs. Pre-retirement roadshows are held for retiring members which are chaired by a member of the pensions department and include a range of speakers from the pensions department, shares department, the Benefits Agency and an independent financial adviser.
Pensions are increased annually in April. Rather than rely on just a payslip, Diageo sends a personal letter to all of its pensioners in March, which gives clear details about how their pension is to be increased.